Podcast: Where do our charity donations actually go?

Ever donated to a charity and wondered how your money is used? We chat about how donations are distributed, the role of charities and the most effective ways to donate.

Australians give a total of $9.9 billion to charities each year according to the most recent ACNC Australian Charities Report and we can only imagine that number will skyrocket in 2020 following this year's catastrophic bushfire season and COVID-19.

When you make a donation, you trust that the money is going where it's needed most, right? Well, it's not always that simple.

As we saw with the bushfire effort, surges in donations often present challenges for charity organisations that have the responsibility to distribute the funds. It can take months for the money to get where it's needed and it often gets tied up in necessary costs such as administration.

This question of "where is my money going?" has made headlines this year, but it's a valid and important question to ask every time you make a donation - whether it's to a well-known charity, Go Fund Me or a donation box at the supermarket.

We chatted to the Commissioner for the Australian Charities and Not-For-Profits Commission. Dr Gary Johns talks about where our donations go, what the responsibilities of registered charities are and what to look out for before you donate your time and money so you know it's going somewhere legit.

Mentioned in this episode

• The ACNC
• Bushfires generosity will not be betrayed by charities
• Celeste Barber fundraiser tied up in legal complications

Read the transcript of this episode

• Episode 210 transcript

  Note: This is a machine-generated transcript. We've tidied it up, but we're sorry if any glitches have slipped through.

  Gary
  They will always be not only the need the desire people, individuals in a free society to come together themselves and sort things out.

  Sally
  Welcome to Pocket Money, everyone the show for people who like to give as well as get when it comes to their finances.

  Kate
  And we sure do love to give Sally In fact, Australians tonight I was really surprised by this a total of $9.9 billion to charities each year, according to the most recent ACNC Australian charities report.

  Sally
  Holy moly!

  Kate
  I know it's massive, isn't it? Which is great. And I can only imagine that the moments in 2020 Hello, we're in the in April. Already. Bit of a nightmare thanks to the bushfires which feel like they're about six years ago and now COVID-19

  Sally
  Yeah, exactly. So I'm sure those donations are only going to skyrocket by the end of the year. I think when you make a donation to a charity, you kind of just trust that that money is going to go where it's needed the most right? But I think in the recent months of 2020 that we have had so far we've realised that it's not always that simple.

  Kate
  Yeah, it's not always that simple. Why we started the bushfire effort, like you know, we get a surge in donations often when something goes wrong. And you know, those charities have a responsibility to distribute the funds and it can take months for the money to get where it's needed. And sometimes might get tied up in sort of costs that you know, you're not necessarily going to say from from the front end. But the question of where is my money going has made headlines in the past and it's a really valid point to us whenever you make a donation, whether it's to a really well known charity, or GoFundMe, or even if it's a little box in the supermarket.

  Sally
  So in today's episode, we're gonna be tackling that question, and we're chatting to Commissioner for the Australian charities and nonprofits commission. God that is a mouthful, Dr. Gary Johns, about where our donations go and also the responsibilities of charities, and what to look out for before you donate your time and money.

  Kate
  Yeah, it's a great interview. I just want to note to the listeners that we did do the interview with Gary before COVID-19 before the madness took over our lives. So a lot of the topics we covered were related to charity work and the bushfire relief, but the tips are still solid gold completely still relevant. So if you are donating audio to the bushfires, because those people are still doing it really tough. And in fact, COVID-19 has made things worse, or whether you're interested in donating into COVID-19 related things going forward. This advice is going to hold up either way.

  Unknown Speaker
  Yeah, exactly. So let's jump into the interview.

  Sally
  Welcome to Pocket Money. Dr. Gary Johns. Thank you so much. for coming on the show today,

  Gary
  Thank you for having me.

  Sally
  And just to kick us off, can you tell us a little bit about yourself and what you do at the ACNC?

  Unknown Speaker
  Well as commissioner of the Australian charities, and not for profit commission, we register charities in Australia, and there are 57,000 charities on our register. And while with great respect to us, the reason why they register with us is because they want the tax benefits that come with registration. So, yeah, that's the name of the game. If you want the taxation benefits that come with being a charity, you have to register with me. And that means that we can look at your credentials to ensure you are charity. We know who you're responsible people are we've got your basic legal documents. And you also have to send an information statement and that gives us some information about what you're up to and what your income and expenditure is

  Sally
  God and you get those details for 57,000 charities every year. That's wild.

  Gary
  Yeah, it's a pretty big show we have about 100 staff. But everything we do is online, we as much as possible avoid paper. And you can imagine for some small charities are not quite with the modern world. That can be a bit of a trial. But but not almost everyone is online. And it means that anyone in the world can search Australian registered charities and find out about their credentials, which is a very important part of the puzzle, because we'll get to that later in the discussion.

  Kate
  Yeah, it absolutely is. And I think particularly in light of some of the disasters we've had in the last six months or so, you know, charities have been at the forefront of everyone's minds. Gary, can you walk us through just a donation life cycle so if I donate money to a registered charity, what what happens next? Where does the money go for example?

  Gary
  Like any other business, you have to bank that donation account for probably send, we should send a receipt. And then charities who wanted to do more than that, they want to report back to their donors that will tell a story about what they're doing with the money. But they will spend money on administration, they have to have to account and report back and bank and so forth. So that's before you even get to think about how the money goes back out the door to its intended beneficiary. And then of course, you have to think, well, what does this charity do? Does it deliver services to people? Does it build things? Does it harm professionals, for instance, psychologists say to go and counsel people. So there are 1000 different ways in which your money could be spent towards a charitable purpose. My plea here is don't get too hung up about a particular measure of administrative expenditure because it may well be exactly what needs to be spent in order to your dollar to do good work.

  Kate
  Gary, do you think people have unrealistic expectations about how charities run you've you've made some great points there? They they need administration, they need staff, their staff need to be paid. What's your feeling there in the community? Do you think sometimes people don't really think about the implications of how a charity needs to be run?

  Gary
  Well, they're probably unaware of the complexity of some fields in which charities work but I think the whole thing is heightened during a crisis. Okay, so we have bushfires the Christmas in Australia. People want to give them a given magnificently, but they expect some sort of quick response and you think well hang on, you can't just send money out the door and give it to anyone. You can't physically even go to those fire grounds they call because they're dangerous. You have to work with others in the field, which is probably local government because they know physically where buildings are. You have to work with, you know, departments of roads and people who worried about the electricity was falling over. And you know, the army got involved. These things are tremendously complex. The charity is observing this. And most of our big charities while all the big charities have tremendous experience here, they know who they have to prep, when they can go in sort of things that were required of them. And of course, it's not all about the immediate response when your house has been sort of razed to the ground. You're going to be in need for years to come. So there's that immediate response and then there's what we call the recovery response. Now as charity Commissioner know nothing about those sort of things. Other than I talked to charities, they're the real people who deliver these services, but I, I've gone to them to things to say, Look, you're copying a lot of flack in the media, you need to explain what's going on. And I'll help you do that. But I'm also telling the public, I will come in and open your books and look at them, I'll order to, I'm not going to do it now because you're too busy. But in time, I will audit you to give reassurance to the public, the money is being spent for the charitable purpose so that that's the period we're in now. I gave an example recently of the charity Wires and they're their sort of wildlife recovery charity. Now they're normally income is about $3 million a year. So that's pretty substantial. But when these bushfires hit televisions all over the world, they received $60 million in donations. In a couple of weeks, that we're getting hundreds of thousands of emails flowing through, I think it was eight a minute or something. They were getting millions of hits on their website now that could have crashed. They didn't. They kept up with that. But hey, that's administration, you have to cope with all of that money coming in and account for the person running it. I take my hat off to her. She was nearly in tears when I spoke to her. She had to make sure the money went into a separate account. She set up an extra board that trusted people who would manage it, and then they had to think about how they would spend that money. So I define any business to do as well as some of that charities have in managing this explosion of money sounds like wow, you're lucky. Yes, you are. But you then have the responsibility of managing the money properly and accounting for it and knowing as a regulator sitting on your shoulder, and of course getting that money out the door, to this defect.

  Sally
  Yeah, I think that's something that we don't realise is that with that generosity comes a lot of complexities for these charities. And you wrote a really great article for the AFR over the weekend, talking about what some of these charities are doing to distribute the money following this big surge of of donations. And you mentioned why it's but the Red Cross is doing something similar as well, because their fund for the bushfires has reached like 150 million dollars or something, hasn't it?

  Gary
  Correct. That's a lot of money and 40 million or so came from overseas. And that creates a different sort of problem. Sometimes you don't know the source of the funds that comes from third parties. And you have to account for it. This difficulty of not being able to send receipts is a difficulty of there's certain protocols on your see money from overseas and has to be checked by others. And you have to make sure that money's separately accounted in an Emergency Fund, they cannot discern Red Cross the half. They established an emergency fund last July, which they do every year rounds for 12 months and they gather money. It's true that they gathered modest amounts of money up to the push fires and then massive outpouring, like up to 100 $50 million. But in legal terms, that money is for any emergency that because the media sort of jumped in and said every dollar has to go to the bushfires. And that's what the donor wants. Well, frankly, we don't know what the donor wants, you know, you can't interview them all. But legally, the money goes into a fund which is for any emergency. Now, I think, red cross to the right thing and said, okay, we'll make sure that almost all the money goes to the bushfire emergency, but this isn't about another emergency next week, or next month. Don't leave money for that as well. So that's the bit that people just don't understand. The monies go into particular, usually trust funds. And those trust funds might have very, very particular rules very particular rules around them. And that's what happened to the rule for us as a New South Wales, an extraordinary amount of money. 50-$60 million flowed into what we might call a very narrow Trust Fund. The money could only be used for very particular purposes in New South Wales to support the real fast service. And yet, the woman who raised you know, wonderfully raised all the money quite unexpectedly wanted to go to other purposes. Well, there's a problem there. It's held in trust. It's a very ancient and very strong means of making sure money is not frittered away on other things. So, look, we've all learned a lot through this bushfire season, people have to know not only who they want to help, the organisation as they trust to manage the money. And then the specific words used when they're asked to get money. But if I could finish on this point, it's not just where a particular packet of money goes. There are thousands of charities involved in the bushfire. So, collectively, they'll work it out. Okay, if my $60 million is locked up by car trucks, don't worry. There's hundreds of millions of dollars that will go to people and animals and other things. So collectively, the sector will get it right.

  Kate
  So Gary, that's a really great point. So rather than thinking my dollars need to specifically go to whatever and I guess, we see this when people want to donate things as well rather than money and often the message is things aren't useful because, you know, we don't know what things are needed and whether needed would you say it's fair to say to people, they just kind of need to relax a bit and know that if they're donating, these charities know what they're doing. And they know how to manage the money and that it is just contributing to the greater good rather than locking down on something very specific

  Gary
  It is, you can't be too specific in these things. And you have to trust the fact that you're putting the hand in to people who know what they're doing. Red Cross does not let someone volunteer today and send them out tomorrow, they all have to be accredited and trained, because you cannot send a volunteer into this field, especially sort of a hazardous one without them being properly trained. And then these are looked after occupational health and safety issues and so on, and also that they should be trained to know that they will be dealing with people who are traumatised. Okay. All that takes money. And yet, sometimes there's an expectation that I find up I volunteer and I want to go and help. Well, thank you very much, but you may do some damage. The same thing goes with goods. Cash is always better because it can be, you know, it's fungible, you move it around, and you can dedicate it to different purposes. The old ways with great respect to us all have, you know, clothes and children's boys night sort of stuff is probably the least useful.

  Kate
  Gary something that strikes me that is a sort of damned if you do damned if you don't, with charities, charities lean very heavily on emotion for donations. And so they should because like you pointed out, it's not a business. People feel very emotional about contributing and wanting to help. And obviously they leaned very heavily into that with their marketing. Would you say the the dark side of that is the fact that people feel more ownership than they probably necessarily should around how that money is distributed.

  Gary
  It's hard to feel ownership when you're putting in 10 bucks and it's not that rational to spend too much time thinking about where the money will go because your investment is. If you're putting in a lot of money, then of course, you want to know and you'll probably chase it up and take quite an interest. Again, it's in these heightened periods where the spotlights on and everyone collectively wants to know where the dough is going. We think about that as a commissioner with a sort of premier data agency for the sector. So, in time, we'll be asking charities in the next annual Information Statement, to tell us what programmes they're running up till now. We've just said, What's your main activity, and they'll just repeat what the lawyers have said, what we're doing as of this July charities and filling out their annual Information Statement, we'll have a piece of software in there that will say tell us your programmes, pop it in, under a category that you reckon has the best chance of being found. They really help and where you deliver the help. So once the they fill that in, we won't have 57,000 charities, we'll have hundreds of thousands of programmes. Now the beauty of this is that in time, you and I can come to my platform the website, I don't have to start with the name of the charity, I start with my charitable interest. So I might say, well, sick children, stray puppy dogs, right? That's how I start my search on the website. And what will happen is you'll get a drop down list of programmes that purport to address my interest and the people or things I want to help. And probably, I want where I want that help to be. Now that will be an extraordinary event, because all of a sudden, the whole sector will be more visible. What it I'm very excited about this. We call it the charity marketplace. And we think it'll answer a lot of those long run questions about what charities are up to.

  Sally
  That's awesome. And I think it's really important because like Kate said, when we're donating, we're donating emotionally and I know as as an individual, you know, I would hope that my couple hundred dollars is going to the right place or going where I want it to. And this tool sounds like it will help with that. And I think another important point that you raised in an article that you wrote on the ACNC site, which we'll make sure to drop in the show notes is about recognising the responsibilities of the charities versus the responsibilities of other services in these tragic situations like the bushfires. So for example, you know, if you're donating to the RFS in this, you know, big Celeste Barber fundraiser, which of course was amazing and got so many donations, but if you're then expecting that money to go to the victims of people's whose houses have burnt down and like there's an education play that's missing there, those dots aren't being connected.

  Gary
  There is a couple of points in there. There's have a quick look, first of all you're going through a registered charity. Secondly, the charity appeal if you like is wide enough for suits your purposes. And the next point is the chairity not the only player out here. Federal government stepped in with large amounts of money ready for recovery, state governments are always in there, local councils are in there. The utilities, you know, electricity, water fire, there are a lot of players in the field and charities will pick up what they're good at. But they don't build the road, put the electricity back on, they're not going to fix your telephone. They'll do more the the immediate relief to counselling, guiding you through government payments that are available to this category of person and not another category person. So also for causes charities do a charities too, but there are a lot of other players in the field as well trying to help

  Kate
  Somebody else that carry you know, like depending on what kind of government we have in power at any given time, there seems to be more onus on charities picking up what some might think a government response civilities. Would you agree with that?

  Gary
  Should government run everything? No! Member charities around long before governments ever got going. There will always be not only the need the desire of people, individuals in a free society to come together themselves and sort things out. So the essence of charity is that I raise funds directly from you, a potential donor to help a beneficiary. In this world, we're in now a lot of charities to rob a great deal of their income from government now, that's okay. But they're not asking the donor anymore. They're not going directly they're going to government and government is then taxing other people to send the money through. So you see how the, there's a separation now, between the charity and the donor, and it goes by government.

  Kate
  We're gonna have a little break for a little game we play a game probably sounds a bit scary. It's so we just call it overrated or underrated. So we give you a couple of topics and you can tell us if you think they're overrated or underrated and you know, if you've got a reason why, you know, feel free to expand, I'll throw the first one to Sally.

  Sally
  So the first one chuggers, so the people out on the street here, you know, you're walking to the train station, and they're handing out flyers and getting you to sign up for charities overrated or underrated,

  Gary
  Overrated for a couple of reasons. They not a big part of the market. And mostly they come with a cost. But the point is, you don't know what the cost is. You don't know how much they are the company is taking. The other side of that is if commercial fundraising organisation came in to see me as a charity. See, they said, pal, I can raise you million bucks. I'd be interested, would I ask them if it took 3 million bucks to raise and million bucks. No, no, no, that's the other side of the coin. So you just have to think about all the paths.

  Kate
  Yeah, I find them really off putting. If anything, it kind of sometimes makes me feel more negatively about charities that I probably shouldn't. I appreciate it's a means to an end. But you know, like, I guess Sal and I based right in the middle of Sydney CBD. Sometimes if you just want to go buy coffee, or, I don't know, pop into the shops, buy some you're gonna run the gauntlet of the target as it can, it can feel like a hell of an obstacle course. Second, overrated or underrated? The example is the Ice Bucket Challenge. So anything that's done online that tends to become a real craze, so the ice bucket challenge I don't know if you remember those people to being ice water all over themselves and filming it. What do you think overrated or underrated?

  Gary
  Well, I just say good on marketing is marketing. If it draws attention to your cause, then good on your site. I'd say line ball between over and under.

  Sally
  Love it. Love a good good on you writing. That's going to be our new system.

  Kate
  Yes, exactly.

  Sally
  The last one is GoFundMe overrated or underrated.

  Gary
  Probably. Under for this reason, I think it's the coming thing. People live online. It's just a vehicle that's all a bit we have to watch out for is okay, I press a button money goes off, ask where the money is going. Okay, so it's underrated from the point of view of it's a coming thing. It'll get bigger and bigger. It might be over at the extent it have a look at where that money is going. And I think that's where we get into the Celeste Barber issue, that you just press a button boom, way you go. Seeking that the money is going to some broad purpose in tackles to a very narrow purpose. And so it gives you a bit of heartache there.

  Sally
  So, jumping back into the heart of the questions, and we touched on this a little bit earlier, but what should Celeste Babar have done differently in this situation, because I think there's a lot of lessons for people to learn from this when they are, you know, thinking of doing their own individual fundraising.

  Gary
  Well, ideally, they're all heroes. In retrospect, she would have chosen either a wider fund, or something that more accurately reflected what she thought she was doing. In short, she should have done a little bit of homework. But look, who would have known she thought she'd rise 1020 hundred thousand dollars and good, honest, she raised millions. But unfortunately, at some point, very quickly, she should have recessed and put out some other advertising and did deal with some other charities that have that money flow elsewhere but easy for us to say in hindsight that it's very difficult to fix now.

  Kate
  Something I'm hyper aware of is some charities seem to be able to raise money at the drop of a hat because they're very palatable. They're high profile and thinking things like breast cancer, as you know, very high profile Red Cross. What happens to those little charities that either have a course that is not sexy or cool, but that need some love? I guess the question is two months is how can they raise their profile? Or you know, what would your advice be to someone that wants to make donations and thinking about where they spend their money?

  Gary
  Well, in the first instance, it is a marketplace out there. So everyone has to get into the marketplace and have a crack. But it's true that there are, you know, big, long lead charities that have also over the years and have tremendous marketing, because in their time, they had something that was very appealing, emotionally appealing now. So what are the good leads to how do they break into that? Well, we're going to help that with the charity marketplace, we're going to say be known for what you do. And not just because you have a name, we'll be able to produce all of the programmes that are available out there in Australia. And you can't Google that. If you Google charities, you'll get big names. You can't know that little list. Eventually on our platform, the ACNC called charity marketplace, you will be able to go in and find programme by programme. So, ideally, a programme run by a large charity only has the same chance things and as a programme run by a small charity, because the search criteria, we'll make it pop out at the end for the first time, you'll be able to have a theory I use the term a level playing field where the programme will determine the results of your search, not the fact that you've gone on to Google and bang that big names come up the top

  Sally
  So Gary to wrap up if our listeners want to research legitimate charities and think about some of the best ways to donate what would be your your final food for thought for them.

  Gary
  You come to the ACNC website. So acnc.gov.au and we have two big sort of signs up there on website, one for charities and one is for the public. And I've purposely put that up there because I'm inviting the public in, come in, have a look, have a rummage around. There's all sorts of good information about giving and what to look for. But there's also tremendous information for charities about how they're supposed to govern themselves. Because that's, that's a big part of their business. Come to the website and have a good play around there and I think you'll learn a great deal.

  Kate
  Do you have any like final thoughts on people obviously are driven to donate during crisis, but what about the power of making a smaller but regular donation? What do you have to say about that?

  Gary
  Oh, charities love that. They really crave it because it gives them a stream of income, but it's also less expensive. You don't have to keep spending money so it's a good idea. At the time I've donated to well surf lifesaving Australia for many, many years and regular basis, because some fella saved my fife when I was 15 years of age, so I'm a bit beholden to them, you know, yeah. Our website is not a substitute for the real world, we give to what we know, or some experience in our life or whatever. But we know that there are enough floating dollars out there, because that's why charities advertise, they want to capture a floating dollar, because most of the dollars are spoken for, you know, we all our experiences mean that we'll only give to certain things. But that's true in any market, we keep going back buying the same products or the same cars or whatever. But enough of us have a little look around. And that's how markets work. Just at the margin, people not quite sure and they start to look. And that'll create a lot more interest a lot, I think more movement in your choice of what you want to search for. And that's a good thing.

  Sally
  Well, thank you so much, Gary, for speaking with us today. I think you've shed a lot of light on what people can do to make sure cCharity dollars going to the right places. And we'll make sure to pop all of those resources in our show notes for everybody to check out.

  Gary
  Terrific. Well, thank you very much indeed for having me on.

  Kate
  Thank you for your time. You've been absolutely amazing. Well, I don't know about you, Sally, I learned quite a bit. Oh, yeah.

  Sally
  I'll be asking myself a lot of questions with all the next time I donate some money.

  Kate
  One thing I took out of it small, regular donations is a really great thing to do. It's tax deductible. All the things we've talked about are on our fabulous shownotes. Just a note, the marketplace, Gary's mentioned is in the works. It's not live yet. They're looking at getting an in place in the next 12 months. So stay tuned. Definitely go and check out our show notes for the address for that. All your other charity needs are going to be addressed in those notes.

  Sally
  Yep. So I had to finder.com.au/podcast for all of those dates. And as always, thank you for listening. If you're feeling charitable labour review on Apple podcasts and make sure to subscribe on Spotify or wherever you listen to your fav shows like Pocket Money. And as always hit us up on Instagram Pocket Money podcast. We'd love to have you around. See you next time everyone. Happy donating Yeah. Thanks for listening to Pocket Money from finder, head over to finder.com.au/podcast for the show notes for this episode. The Finder podcast is intended to provide you with tips, tools and strategies that will help you make better decisions. Although we're licenced and authorised, we don't provide financial advice. So please consider your own situation or get advice before making any decisions based on anything in our show. Thanks for listening!

The Finder Pocket Money podcast is intended to provide you with tips, tools and strategies that will help you make better decisions. Although we're licensed and authorised, we (and our guests) aren't providing any form of financial or legal advice. So please consider your own situation and get proper advice about your individual circumstances before making any decisions based on anything on our show. Thanks for listening.

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Pocket Money is hosted by Sally McMullen and Kate Browne, produced and directed by Franko Ali, with editing and theme music from Brianna Ansaldo of Bamby Media.

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